CFPB Publishes Report on Using Reverse Mortgages to Delay Social Security Benefits

On August 24, 2017, the CFPB (or Bureau) released a report on the financial impact of seniors using FHA-insured Home Equity Conversion Mortgage (HECM) loan proceeds to bridge the gap in income while delaying Social Security benefits until a later age.

In the report, the CFPB states that some financial professionals promote the use of a reverse mortgage loan as a way to delay claiming Social Security benefits.  With this approach, the Bureau explains that “a homeowner uses a reverse mortgage loan to replace the income they would otherwise receive in Social Security benefits in the years between the minimum benefits age (age 62) and their full benefits age or later. When Social Security benefits are delayed, beneficiaries see a permanent increase in the monthly benefit, which, based on current life expectancies, results in an increased cumulative lifetime benefit.”  However, the CFPB’s report found that the costs of taking out a reverse mortgage may, in certain situations, exceed the cumulative increase in Social Security lifetime benefits that homeowners would receive by delayed claiming.

The Bureau also released a consumer guide and video to help prospective borrowers and their families understand how reverse mortgages work so that they can make an informed decision about obtaining a reverse mortgage loan.

The CFPB’s reverse mortgage consumer guide, entitled the “Reverse Mortgage Discussion Guide,” can be found at: http://files.consumerfinance.gov/f/documents/cfpb_reverse-mortgage-discussion-guide.pdf.

The CFPB’s video explaining reverse mortgages can be found at: https://youtu.be/L89d3faoFGw.

The full text of the CFPB’s report can be found at: http://files.consumerfinance.gov/f/documents/201708_cfpb_costs-and-risks-of-using-reverse-mortgage-to-delay-collecting-ss.pdf.